Swamp Notes: Trump’s case against Fed chair Powell

Mark Filippino (0:02)

So on Thursday, the president of the United States walked into the Federal Reserve building in Washington, DC.

Adam Posen (0:08)

So we're going to take a look. We're going to see what's happening.

Mark Filippino (0:11)

And while he was there, he squared off with the chairman of the US. Central Bank, Jay Powell.

Adam Posen (0:16)

So the 2.7 is now 3.1. I'm not aware of that. It just came out.

Mark Filippino (0:23)

I haven't heard that from anybody in the Fed. Maybe it's obvious, but US. President Donald Trump does not like the Fed chair. He's been saying this for months.

Lauren Fedor (0:32)

The job he's done is just terrible.

Mark Filippino (0:34)

The Federal Reserve doesn't want to cut interest rates nearly as fast as the president does. And that has infuriated Trump. Now it looks like he's building a case to fire Powell and upend the Central Bank in the process. This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all of the things happening in US politics, finance and the economy. I'm Mark Filippino, and this week we're asking, what will happen if Donald Trump does actually fire Jay Powell? Here with me to discuss is Claire Jones. She's the FT's US economics editor, and she covers the Fed. Hi, Claire.

Claire Jones (1:11)

Hi, Mark.

Mark Filippino (1:12)

Also joining us is Adam Posen. He's the president of the Peterson Institute for International Economics. Adam, welcome.

Adam Posen (1:18)

Thanks for having me, Mark.

Mark Filippino (1:19)

So Claire, you were on the show last week to answer a listener question about whether or not the president can fire Jay Powell. Does he have that power? Obviously, the story has continued to get bigger since then in just a week. Can you tell us why Trump took this trip down to the Federal Reserve building? What was he trying to accomplish?

Claire Jones (1:37)

So I think it's a very good question. I mean, as we talked about last week, it's very difficult for Trump to fire Jay Powell over monetary policy. The Supreme Court has made it quite clear that it doesn't think the executive branch has the power to fire either the Fed chair or the other six governors on the Fed board for disputes over interest rates. So there's the sense in which people think attention's now turned to a renovation that's been running for years to kind of serve as a pretext to go after Powell on other grounds.

Mark Filippino (2:18)

And what are those other grounds? Can you explain a little bit the renovation?

Claire Jones (2:22)

So the Fed's renovation is costing a lot of money. It's costing 2.5 billion dollars. There are good reasons why it's costing so much. It's a refurbishment of a historical building that's 90 years old or almost 90 years old. Also during the last administration, Trump-appointed officials really wanted to preserve the buildings on the national mall, such as the Fed's headquarters, by using materials such as marble. So there was the sense in which they had to do a lot of preservation work. However, the fact that they're spending so much has now attracted a lot of attention. It's really been over recent weeks where we've seen certain allies of Trump really try to attack the Fed over the cost of this building work.

Mark Filippino (3:12)

Now, Adam, does that argument, spending too much, not communicating when the Fed should, does that make sense to you here? Does Trump and his administration actually have an argument?

Adam Posen (3:23)

No, they have a pretext. Now, they may have some use for them, Mark, in really bare knuckles, nasty political force. But in terms of either good policy or realistic legal argument, no. They're trying to make up something that will additionally pressure the chair in a very overt way. And I think the way they seem to think about it is, if they keep attacking the chair and the Fed on multiple fronts at once, at some point, they think Powell and the top staff will break or screw up or do something. It's not because they actually expect any of this to be valid. It's just a pretext for pressuring them.

Mark Filippino (4:13)

Adam, I'm really interested because I've only been a financial journalist in the time that Powell has been Fed chair. But I'm curious, since you have a lot more experience in this field than I do, have we seen this kind of hostility between Fed chairs and presidents in the past or is this a really unique situation?

Adam Posen (4:30)

Mark, I actually did my dissertation on Central Bank Independence 30 years ago.